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MUMBAI: Consumers will keep paying high interests on car and home loans even as tomato and potato prices continue to pinch as the Reserve Bank of India decided to keep key interest rates unchanged, dampening hopes of a cut in loan rates.

The central bank in its bimonthly monetary policy statement on Tuesday left the repo rate, or the rate at which it lends money to banks for short-term, unchanged at 8 per cent and cut statutory liquidity ratio, or SLR, by 50 basis points to 22 per cent.

While the cut in SLR will improve liquidity in the banking system, this may not translate into immediate reduction in loan rates. SLR refers to banks' minimum bond holding requirements.

"We do not expect any change in interest rates - deposits or lending rates - immediately on account of reduction of SLR," said CVR Rajendran, chairman and managing director at Andhra Bank. RBI governor Raghuram Rajan himself had said the SLR cut was "not intended to make loans cheaper today".

"It was to give banks more flexibility on their balance sheet going forward as credit growth picks up," he told reporters after releasing the monetary review. The central bank has been concerned with the runaway prices of food articles and has left the repo rate unchanged since January to tame price rise. In June, the retail inflation rate was the lowest since the government started publishing the data series in January 2012, with the consumer price index (CPI) showing a 7.31 per cent rise from a year earlier. Rajan stressed that the next goal was to bring inflation down to 6 per cent by January 2016, while warning of upside risks to that target also.

Bankers said this has dampened hopes of a possible cut in interest rates. "You could see small reductions in interest rates in the interim but no major reduction in rates," said Sunil Kaushal, regional chief executive, India & South Asia, at Standard Chartered Bank. This is because high interest rates and slow growth have impacted credit demand from corporates, and to make up for that banks have been wooing individuals to buy cars and loans.

"Banks will test competition and we could see a 25 basis point cut on big ticket secured loan transactions like home loans," Kaushal said. Some banks such as state-owned Bank of India plan to cut deposit rates.

"We are looking at reducing deposit rates in two maturity buckets, maybe nine to 12 months tenures, but I do not see lending rate cuts till December this year," said VR Iyer, chairperson and managing director at Bank of India. "Cost of funds has to come down," he added.